U.S. weekly jobless claims unexpectedly fall; core PPI rises in July

By Lucia Mutikani

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits unexpectedly fell last week, suggesting that a strong economy was helping the labor market weather ongoing trade tensions between the United States and a host of other countries.

Other data on Thursday showed a solid increase in underlying producer prices in July. Labor market strength and rising inflation likely keep the Federal Reserve on track to raise interest rates in September for the third time this year.

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 213,000 for the week ended Aug. 4, the Labor Department said. Data for the prior week was revised to show 1,000 more applications received than previously reported.

The claims data is being closely watched for signs of layoffs as a result of the Trump administration's protectionist trade policy, which has left the United States embroiled in tit-for-tat tariffs with major trade partners including China, Mexico, Canada and the European Union.

Washington imposed duties on steel and aluminum imports, provoking retaliation by the nation's trade partners. The United States has also slapped tariffs on Chinese goods, with Beijing responding in kind. Manufacturers are increasingly complaining about more expensive steel and aluminum raising production costs, as well as causing disruptions to the supply chain.

There have been reports of some companies either laying off workers or planning to as a result of the import tariffs.

Claims dropped to 208,000 during the week ended July 14, which was the lowest reading since December 1969. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 500 to 214,250 last week, the lowest reading since mid-May.

UNDERLYING PRODUCER PRICES RISE

U.S. financial markets were little moved by the data.

The economy created 157,000 jobs in July, a step-down from the 248,000 positions added in June. The slowdown in hiring likely reflected a shortage of qualified workers. A report on Tuesday showed there were 6.7 million unfilled jobs in June.

The economy grew at a 4.1 percent annualized rate in the second quarter, the fastest in nearly four years.

In another report on Thursday, the Labor Department said its producer price index excluding food, energy and trade services rose 0.3 percent last month. The so-called core PPI rose by the same margin in June. In the 12 months through July, the core PPI increased 2.8 percent after rising 2.7 percent in June.

The strong labor market and robust economy are pushing up inflation. Import duties are also seen boosting price pressures.

The Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased 1.9 percent in June. The PCE price index hit the U.S. central bank's 2 percent inflation target in March for the first time since December 2011.

The Fed raised interest rates in June and has forecast two more hikes by December.

Overall producer prices were unchanged in July for the first time in seven months amid declines in the costs of gasoline, food, airline fares and hospital outpatient care, which offset increases in prices for hotel accommodation, pharmaceutical preparations, hospital inpatient care, apparel, motor vehicles and transporting goods by road.

The unchanged reading in the PPI for final demand followed a 0.3 percent increase in June. In the 12 months through July, the PPI advanced 3.3 percent, slowing after June's 3.4 percent increase. Economists had forecast the PPI gaining 0.2 percent in July and rising 3.4 percent year-on-year.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)